Preparing for the New Year: New CUSO Requirements


By Brian R. Witt

glasses-calculatorNCUA recently amended its CUSO Rule to include sweeping changes that will affect all CUSOs owned by federal and state chartered credit unions. It’s time to prepare your CUSO for the new rules that take effect in June 2014.

On November 21, 2013, the NCUA Board issued amendments to the CUSO Rule (Part 712) that added registration and reporting requirements for all CUSOs and further extended its regulatory reach over federally insured state chartered credit union CUSOs. As expected, NCUA’s final rule closely tracks its original proposal. However, NCUA also adopted risk targeted reporting by complex or high risk CUSOs and delayed the effective date for registration and reporting.

Overview of New CUSO Requirements

The CUSO rule amendments, designed to assist NCUA in regulating credit unions’ interests in and loss exposure for CUSO operations, add significant new administrative work for CUSOs. Generally the CUSO rule amendments become effective on June 30, 2014. However the new registration and reporting requirements will not become effective until the new government reporting system is operational, which NCUA expects no later than December 31, 2015. The CUSO requirements include:

  • National CUSO Registry – all CUSOs must register on NCUA’s future online registration system
  • CUSO Annual Reporting – all CUSOs must submit annual reports to NCUA
  • CUSOs conducting complex or high risk activities must register and report additional detailed business & financial information
  • Current financial & accounting requirements were extended to CUSOs of federally insured state chartered credit unions
  • Restrictions on recapitalizing CUSOs were extended to federally insured state chartered credit unions

In addition to issuing its final amendments to Part 712, , NCUA issued Letter to Credit Unions 13-CU-13 providing an overview of the CUSO Rule changes and reporting requirements.

CUSO Losses Result in More Regulation

NCUA took a year and a half to propose and finalize the rule. While there was strong opposition from the CUSO industry, which seemed to stall the rule, the underlying impetus for the rule—CUSO losses—continued to grow. According to NCUA, since 2008 CUSOs have caused credit unions more than $300 million in direct losses and still pose potentially widespread financial and operational risks to credit unions and the National Credit Union Share Insurance Fund (NCUSIF). NCUA claims it has not been able to conduct offsite monitoring to assess these potential risks because they lacked access to financial and operational information from CUSOs. NCUA has always had full access to any CUSO information, just not in an organized registry. Whether the increased regulation will reduce CUSO losses over time is questionable. NCUA’s supervisory enforcement authority over credit unions and corporates has not resulted in reduced losses or risk to the NCUSIF. 

2014 CUSO Requirements

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